It’s Hot Days, Not Cold, That Really Chill Labor Productivity

A working paper from the National Bureau for Economic Research suggests that hot days can hurt productivity by more than $20 per person per day.

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As snow once again hits the Northeast, new research suggests that warmer weather is to blame for driving down productivity, even in an industrialized country like the United States.

A working paper from the National Bureau for Economic Research suggests that hot days can hurt productivity by more than $20 per person per day, and offers a look at what climate change will mean for long-term economic growth.

Economists have long known that labor productivity goes down when it's hot, says co-author Tatyana Deryugina, an assistant professor of finance at the University of Illinois at Urbana-Champaign. But most research focuses on the effect of temperature in the developing world because of the assumption that industrialized countries can better control the environment by using technology like air-conditioning. In addition, industrialized countries rely far less on income from agriculture, which is highly dependent on weather, and can better alter the crops they plant to maximize profits based on the climate.

Correspondingly, the conventional wisdom says that industrialized countries will be far less affected by climate change than developing ones.

Dr. Deryugina, along with Dr. Solomon Hsiang of the University of California at Berkeley, used a 40-year data set to analyze the relationship between changes in local temperatures at the county level and changes in local income in the U.S.

By the time the temperature becomes higher than 30 degrees Celsius, or 86 degrees Fahrenheit, that loss hits $20 per person per day, she said. Hot weekends don't have much effect since most people don't work during that time.

They did look at the effect of cold weather and found, in some cases, a bit of a productivity dip for moderately cold weather. But it wasn’t consistent enough to try to make the claim that cold weather also has a consistent effect on income or productivity.

The authors do some back-of-the-envelope calculations to see what this means given steadily rising temperatures. They use 44 model projections that estimate climate change given a "business as usual" scenario--meaning that efforts are not taken to drastically reduce carbon emissions.

If the climate projections are correct, rising temperatures will cost the U.S. 0.06 to 0.16 percentage point in annual growth, a finding Dr. Deryugina calls "small, but statistically significant."

"It might not seem like a lot, but if you add that up over many years--because that's a permanent lower growth that's lowering compound interest--it ends up costing the U.S. quite a bit," she said.

This past year was the warmest one on record and in recent months the U.S. has been forming more collaborations to fight climate change. In November, President Barack Obama announced his plan for the U.S. to cut emissions by more than a quarter between 2005 and 2025, and brought China's President Xi Jinping into the fold with China's own ambitious carbon-cutting goals.

Last month, the president tackled the issue at meeting with Indian Prime Minister Narendra Modi, during which the two talked about allowing U.S. firms to invest in nuclear power plants in India.